The impact of digital industry agglomeration on firms' carbon emissions: new micro-evidence from Chinese manufacturing firms.

ABSTRACT

In the backdrop of the rapid evolution of the digital economy, the intricate relationship between digital industry agglomeration (DIA) and manufacturing firms' carbon emissions has become crucial for countries to achieve sustainable development. This study delves into this complex dynamic by analyzing data from Chinese-listed manufacturing companies spanning the years 2014 to 2021. A regional-level DIA Index is calculated to explore its impact on manufacturing firms' carbon emissions. The main finding reveals a U-shaped relationship, with an inhibitory effect on carbon emissions in most provinces to the left of the inflection point. Notably, Guangdong Province experiences a promotional phase to the right of the inflection point, where agglomeration intensifies carbon emissions. The robustness tests, including Utest, instrumental variable examination, and propensity score matching, support the credibility of these findings. Mechanism analysis reveals the mediating role of manufacturing firms' technological innovations in this relationship. Specifically, DIA is related to manufacturing firms' technological innovation in an inverted U shape, and technological innovation inhibits these firms' carbon emissions. This micro-evidence not only contributes to a nuanced understanding of the relationship between DIA and carbon emissions but also provides valuable insights to guide policies for sustainable development within the dynamic context of the digital economy.